Identifying Market Segments and Targets

A market segment consists of a group of customers who share a similar set of needs and wants. The marketer's task is to identify the appropriate number and nature of market segments and decide which one(s) to target.Whether using descriptive characteristics: geographic, demographic, and psychographic or using behavioral considerations:consumer responses to benefits, usage occasions, or brands, the key is adjusting the marketing program to recognize customer differences. The major segmentation variables - geographic, demographic, psychographic, and behavioral segmentation.

Geographic Segmentation

Geographic segmentation divides the market into geographical units such as nations, states, regions, counties, cities, or neighborhoods. The company can operate in one or a few areas, or it can operate in all but pay attention to local variations. In a growing trend called grassroots marketing, such activities concentrate on getting as close and personally relevant to individual customers as possible.

Demographic Segmentation

In demographic segmentation, we divide the market using variable such as age, family size, family life cycle, gender, income, occupation, education, religion, race, generation, nationality, and social class. Demographic variables (Age and life-cycle stage, Life stage, Gender, Income, Generation, Race and culture) are popular with marketers because they're often associated with consumer needs and wants and because they're easy to measure.

Psychographic Segmentation

Psychographics is the sience of using psychology and demorgraphics to better understand consumers. In psychographic segmentation, buyers are divided into different groups on the basis of psychological/personality traits, lifestyle, or values. People within the same demographic group can exhibit very different psychographic profiles.

One of the most popular commercially available classification systems based on psychographic measurements is Strategic Business Insight's VALS framework. VALS, signifying values and lifestyles, classifies U.S. adults into eight primary groups based on demographics and attitudes. The main dimensions of the VALS segmentation framework are consumer motivation and consumer resources.

Behavioral Segmentation

Marketers divide buyers into groups on the basis of their knowledge of, attitude toward, use of, or response to a product. Behavior variables can include needs or benefit, decision roles, or be user and usage-related.

Needs and Benefits - Not everyone who buys a product has the same needs or wants the same benefits from it. Needs-based or benefit-based segmentation is widely used because it identifies distinct segments with clear marketing implications.

Decision Roles - People can play five roles in a buying decision: Initiator, Influencer, Decider, Buyer, and User. Different people are playing different decision roles, but all are crucial in the decision process and ultimate consumer satisfaction.

User and Usage - Many marketers believe variables related to various aspects of users or usage - occassions, user status, usage rate, buyer-readiness stage, loyalty status, and attitude - are good starting points for constructing market segments.

Evaluating and Selecting Market Segments

In evaluating market segments, the firm must look at the segment's overall attractiveness and its own objectives and capabilities. Marketers have a range or continuum of possible levels of segmentation that can guide their target market decisions.

Full Market Coverage

The firm attempts to serve all customer groups with all the products they might need. Only very large firms such as Microsoft and Coca-cola can do this, covering a whole market through undifferentiated (mass marketing, the firm ignores segment differences and goes after the whole market with one offer) or differentiated marketing (the firm sells different products to all the different segments).

Multiple Segment Specialization

With selective specialization, a firm selects a subset of all the possible segments, each objectively attractive and appropriate. They may be little or no synergy among the segments, but each promises to be a moneymaker.

Single-Segment Concentration

With single-segment concentration, the firm markets to only one segment. Through concentrated marketing, it gain deep knowledge of the segment's needs and achieves a strong market presence. It also enjoys operating economics by specializing its production, distribution, and promotion. If it captures segment leadership, the firm can earn a high return on its investing.

A niche is a more narrowly defined customer group seeking a distinctive mix of benefits within a segment.

Individual Marketing

The ultimate level of segmentation leads to "segments of one", "customized marketing," or "one-to-one marketing."

 

SUMMARY

A company can divide a business market into geographic segmentation, Demographic segmentation, psychographic segmentation and behavioral segmentation. Business marketers generally identify segments through a sequential process. There are many statistical techniques for developing market segments. Once the firm has identified its market-segment opportunities, it must decide how many and which ones to target. Marketers are increasingly combining several variables in an effort to identify smaller, better-defined target groups. To be useful, market segments must rate favorably on five key criteria: measurable, substantial, accessible, differentiable, and actionable. Marketers use full market coverage where the firm attempts to serve all customer groups with all the products they might need, multiple segment specialization which a firm selects a subset of all the possible segments, each objectively attractive and appropriate, single-segment concentration where the firm markets to only one segment, niche is a more narrowly defined customer group seeking a distinctive mix of benefits and individual marketing is the ultimate level of segmentation.

Market targeting sometimes generates public controversy when marketers take unfair advantage of vulnerable groups (such as children) or disadvantaged groups (such as poor people) or promote potentially harmful products. Establishing ethical and legal boundaries in marketing to children online and offline continues to be a hot topic as consumer advocates decry the commercialism they believe such marketing engenders.